The government is exploring a plan to open a second ship registry in India after the Parliament enacted a new Merchant Shipping law that eased restrictions on registering ships under the Indian flag, a top official has said.
The proposal is modelled on international ship registries set up by European countries such as Norway and Denmark to woo back local shipping tonnage that has migrated to flags of convenience (FOC) regimes which offer dollops of tax incentives.
The Merchant Shipping Act, 2025 facilitates reforms relating to ownership of ships that can be registered in India, a move aimed at boosting India’s below par shipping tonnage – less than 1 per cent of the global fleet.
Confirming that setting up a second ship registry was on the government’s radar, the Director General of Shipping, Shyam Jagannathan said, “As provided under Sections 14 and 15 of the new Merchant Shipping Act, we are in the process of formulation of rules for registration/chartering of vessels including ships acquired through the bareboat charter cum demise (BBCD) model”.
The second registry will likely be domiciled in the Gujarat International Finance Tec-City (GIFT City), India’s first and currently the only International Financial Services Centre (IFSC) operating under the Special Economic Zones Act. This will add to the charm of the Gandhinagar, Gujarat-based taxfree enclave which has already seen its popularity grow as a platform for ship leasing activities compared to the Domestic Tariff Area (DTA).
“GIFT City will be provisioned a specific dispensation to equate its ease of doing business to international maritime hubs like Dubai, Singapore and Hong Kong,” Jagannathan said, adding that the “draft rules should be ready by January 2026″.
A ship registry refers to the registration of the shipowner, the name of the ship, the technical data and performance parameter of the ship, and other matters carried out by the national ship registration authority (the Mercantile Marine Department in the case of India) according to the relevant international conventions and national laws. A ship registry is not only a necessary condition for a ship to acquire nationality and navigation rights, but also an administrative means for the flag state to effectively manage ships engaged in related shipping trade. It is also a legal means to confirm the ownership, mortgage and lease of a ship.
The new MS Act aims to promote ease of doing business in the maritime sector, increase India’s tonnage, strengthen the country as a bankable shipping jurisdiction, enhance welfare of Indian seafarers, improve adjudication and predictability of claims.
It will help expand the ownership criteria of Indian vessels, allowing Non-Resident Indians (NRIs), Overseas Citizens of India (OCIs), joint ventures and body corporates also to make investments in India and own vessels under the Indian flag.
It will also facilitate registration of a foreign vessel chartered on a so-called bareboat charter cum demise (BBCD) contract by an Indian charterer.
BBCD is a form of financing ship acquisition, whereby the purchase is typically done by paying one-fourth of the total cost of the vessel as down payment while the balance is paid in installments over the demise period, typically ranging from three-five years.
Currently, a BBCD ship is allowed to be converted to an Indian flag ship only when the last installment is paid to the overseas owner. Till then, it flies the flag of the jurisdiction where it is registered.
The ministry plans to permit ships acquired through the BBCD route to be registered even before the last installment is paid.
Level-playing field
A second registry is adopted by a country specifically for international deep-sea trade rather than local trade. It normally covers vessels that are not engaged in the coastal trade of the country. So, coastal/offshore vessels remain with the first registry and tonnage involved in deep sea international trade will be allowed to adopt the second register.
The second register is meant to provide a “level-playing field compared to open registries/ FOC jurisdictions like Panama, Liberia, Marshall Islands, etc, which currently control over 50 per cent of global tonnage”.
Most of these second registries have some additional restrictions which makes them less favourable, but countries hope that sops given are enough and local financiers will insist on local second registries as it is easier to monitor and enforce, especially, mortgages.
In Denmark, the Royal Danish Register of Shipping is the traditional, national register reserved for ships of Danish ownership which are home-ported in the country.
The second register, the Danish International Ships Register (DIS), is also reserved primarily for Danish owners, but the difference is in the degree to which foreign interests are allowed to participate in the management and ownership of the shipping company, the types of eligible vessels, geographical and trade restrictions on activity, cabotage, taxation, and crewing issues. For instance, under the DIS, Danish shipowners may operate ships with a crew not subject to Danish national collective agreements (on wages) but on international competitive terms.
Similarly, the Norwegian International Ship Register or NIS is a separate ship register for Norwegian vessels aimed at competing with flags of convenience registers. It was set up after the national Norwegian register lost out to lower-cost FOC registers.
By setting up a second ship registry, Norway sought to maintain the shipping industry under the Norwegian flag, provide better competitive conditions for the Norwegian merchant fleet in worldwide trade, maintain a Norwegian fleet that could give greater employment opportunities to Norwegian seaman than a foreign-flagged fleet, restrict the types of vessel that may be registered and limit the trading areas. For example, NIS vessels cannot trade cargo between Norwegian ports or carry passengers on a regular basis to or from Norwegian ports.
“While a second Indian registry in GIFT City is desirable, the objectives and targeted tonnage for the registry should be clear. The key driver for the registry should be to enhance and help the comprehensive shipping eco system in GIFT City, rather than registry revenues or the strategic aspect of the Indian flag,” said Amit Oza, Director, Astramar Shipping & Trading Services.
“Like the Singapore registry, the GIFT City registry should offer freedom in choice of crew, class and other aspects of manning, while providing for a robust and efficient system for vessel mortgage, ownership, registration and management. Legal framework with focussed arbitration centres and commercial courts in GIFT City with admiralty expertise are imperative. The ‘passport management’ model of contracting the processes to a third party
should be explored. The focus tonnage should be tonnage owned by Indian capital, tonnage involved in Indian trade and most importantly, tonnage funded by Indian capital for global operations. With the recently approved Maritime Development Fund and other focus on shipping finance, platforms like GIFT City are sure to attract funds to be managed by units there and such investments require a comprehensive eco system including a high quality, reputed global ship registry,” Oza explained.
(source: ET Infra)
